As you know, we had a terrific Question-of-the-Day Marathon in August. I answered almost every question (not always on time!), and below I've compiled my answers for easy perusal. Obviously because of the format I didn't always go into great depth-- let me know if any of my responses interest you and you'd like to see me flesh it out into a full post!
Q: If your budget required you to give up something that you like because you just didn’t have enough money to cover your expenses, what would that be?
A: Honestly, it would have to be moving to a cheaper apartment, giving up the convenience of the current one, which is a terrific value for its location but really I don’t need to live so close to downtown.
Other than that, I guess there’s taking fewer vacations, spending less on gifts and treats for other people, and switching to dial-up instead of high-speed internet…
Q: What is the weekly average cost per person for food in your household, including groceries, snacks and eating out?A: Man, I feel a little weird about my numbers being so low, but I’m at around $25/week for groceries and maybe $10/week eating out. I’m guessing that part of it is being a vegetarian, and part is not buying as many fresh fruits and veggies as I should…
Q: What was the last thing that you splurged on that you didn't really need?
A: Nothing big that I can think of, but I’ve definitely treated myself to ice cream or frozen coffee drinks, etc, too often this summer…
Q: How many credit cards do you have and what's their combined credit limit?
A: Just two– the MBNA I’ve had since I started college, which is now up to a limit of $15,000, and which I stopped using 1 1/2 years ago when it stopped giving me Barnes & Noble reward certificates; and the Citi card I got in its place and now use regularly, with a limit of $8,200. I never carry a balance; I use them for the rewards/cash back (and also because the statements help me keep track of what I’m spending on).
Q: Which is more important to financial success: saving money or making your income as high as possible?
A: I think it depends on how you define "financial success." If you mean "having as much money left over after expenses as possible," then logistically, it's probably going to be increased income that gets you there. However, if you define "financial success" as "having the ability to live your life in a way that makes you happiest and most fulfilled," cutting expenses may be a better route (or at least, it is for me). Q: In terms of your annual gross salary, what percentage do you save? Are you happy with that amount or do you think you could do better?
15% of gross goes to retirement (between 401(k) and Roth IRA), and I'm guessing it's about 20% that goes to other savings (15% of my monthly gross is automatically deducted from checking to savings, and I usually funnel more over manually throughout the month).
Q: If you had $10,000, one day, and one store to spend it in, what store would you choose?
Oh, man. I think I'd have to jump on the Ikea bandwagon. My apartment could use a major upgrade, but I always shy away from the costs of new furniture; I'd load up on good stuff that'd hopefully last a long time. And I think $10,000 would be enough to make that decision not only practical but fun!
Q: If you had to pinpoint the one financial decision (good or bad) that put you on the path to where you are now, what would it be? If you could do it over, would you change your decision?
Great question! And some great answers.
No real turning point jumps out at me, so I guess I'll have to go with deciding, after I got my first job out of college, not to upgrade my lifestyle when my income went up. Sticking with the same old used furniture, only buying as much new clothing as necessary for my job, not buying a car since I really didn't need one. Although my expenses went up some, I tried to view my extra income as extra savings, not extra spending money.
Q: What do you consider an expensive night out?
We don't usually do dinner and going out for drinks on the same night. $50 for two for dinner would feel expensive, and probably $30-40 for drinks for two.
Q: What percentage of financial success comes from “financial skills” and what percentage comes from “character?”
Interesting question. I don't think you can succeed without some amount of character (unless you started out very well off to begin with), but struggling financially doesn't necessarily indicate you have "bad character." And there's obviously more to the equation than character and skills, especially considering where the person starts from and what resources they have available to help themselves.
For example, there are some people who are very frugal and self-disciplined on low incomes, but because they lack knowledge and experience (and access to better options) they do things like using payday lenders at exorbitant rates. So your "skills" category would help them do better once they understood the implications of payday lending. But even if they had both the skills and the character, they might still be struggling.
It also depends on how you define "financial success"!
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Increasing your income can involve a lot of sacrifices and tradeoffs that may not be worth the payoffs in the end. (It may also involve taking risks that some people are not in a financial position to handle to begin with.) Saving money and living frugally, on the other hand, pushes and inspires you to think creatively about ways to make yourself and others happy that aren't centered around spending money.
I personally would consider myself financially successful if I'm able to get by while doing the work I'm most passionate about and work only the number of hours that make sense for me and my family-- requirements that might very well require decreasing income. I know that not many people define "financial success" that way, though.